Major taxation bill introduced
A bill introduced into Parliament today will bring into effect New Zealand's part in a landmark agreement with Australia to remove a tax impediment to trans-Tasman investment.
"The joint initiative, announced in February, reflects the commitment of both governments to the continued strengthening of the Closer Economic Relations agreement and to reducing impediments generally to trans-Tasman business," Revenue Minister Michael Cullen said.
"To this end, the imputation systems of each country are being extended to include companies resident in the other country that want to take part. The bill will make New Zealand imputation credits available to Australian companies, while similar legislation before Parliament in Canberra makes Australian franking credits available to New Zealand companies," Dr Cullen said.
Other major reforms introduced in the bill are:
- Legislation that better aligns the GST treatment of the financial services sector with that of other industries. Banks, credit unions, life insurers and other financial institutions will be allowed to recover GST on purchases related to the supply of their services to businesses, which will reduce over-taxation of the sector.
- Introduction of a GST reverse charge to tax certain imports of services, to alleviate the distortion in favour of imported services, which, unlike domestically supplied services, are not subject to GST.
- A measure to combat aggressive tax arrangements, many of which are mass-marketed, that result in investors receiving more tax deductions than the money they invest in the arrangement. A new rule will target arrangements in which investors are not at real risk of having to repay associated loans.
- Legislation enabling employer contributions to superannuation funds on behalf of employees earning less than $38,000 a year to be taxed at a lower, 21 per cent rate. The measure is intended to reduce the over-taxation of the retirement savings of low-income people.
Full information on these and other matters in the Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill is available in the commentary on the bill published at www.taxpolicy.ird.govt.nz.
Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013. Technical inquiries to Helen Mackenzie 04-471-9728.